Two Boulder Junction developers and property owners who sued the city last week for more than $1 million have been removed from their positions on City Council-appointed advisory boards due to what officials deem a conflict of interest.

In a suit filed Friday in Boulder County District Court, Scott Pedersen and Jeff Shanahan claim the city owes them money for completed housing and parking projects at Depot Square, a key Boulder Junction parcel they redeveloped.

Both served on the Boulder Junction Parking Commission, and Pedersen also served on the Boulder Junction Transportation Demand Management Commission.

Their company, 3001 Pearl LLC, is pursuing claims against the city and the Boulder Junction Access District.

Pedersen and Shanahan allege Boulder has failed to pay them $613,550 in city housing funds for affordable units they built at Depot Square, plus another roughly $750,000 in city Access District funds for 100 parking spaces they lease to Boulder.

Both sides say they hope to resolve the dispute as soon as possible, and will meet in mediation early next month.

In explaining to the City Council why his office believes the two men cannot serve on the two commissions any longer, City Attorney Tom Carr said on Tuesday, "the motion today is to remove people we have a fight with. ... There is a clear conflict of interest."

The council unanimously approved the motion.

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"We're not making any decisions of findings with respect to who's right or wrong," said Mayor Pro Tem Andrew Shoemaker, who is an attorney. "It's just purely the fact that they're in litigation with the city."

Disagreement over housing payments

Depot Square is one of the most significant projects in the Boulder Junction neighborhood, a fast-changing district the city hopes will become a transit-friendly commercial and residential draw. The Depot plot sits just north of Pearl Parkway and just east of 30th Street, and features a Hyatt Place, a restaurant, an RTD bus station, a parking garage and apartments.

Pedersen was selected to develop the site through a competitive process after he suggested putting the bus station underground and eliminating the possibility of a surface parking lot.

Pedersen also developed Solana, a 319-unit upscale apartment complex across the street from Depot Square. His company sold Solana — which is now under a third owner, which renamed it Griffis 3100 Pearl — to Reylenn Properties.

Through a deal with the city, it was decided that all $5.4 million paid in lieu of affordable housing at what was then called Solana would go into the Depot Square apartment project.

The $613,550 represents the final installment of housing funds the city agreed to pay 3001 Pearl.

The dispute over that money centers on whether Pedersen and Shanahan have fulfilled the original agreement between the city and developer, which required for purposes of payment that 3001 Pearl demonstrate all construction costs have been paid and lien waivers have been obtained.

Contractors recently sued 3001 Pearl, claiming they had not been paid for construction work done at the apartments, and 3001 Pearl settled for $1.1 million.

"Now the city says they don't owe us the ($613,550) because there are liens on the property, but as a partner, they should have paid us that money by now to take care of those liens," Pedersen said in an interview.

"They're saying they won't make the payment until we remove the liens. We said we need the city's money in order to remove the liens and pay the contractor" the settlement cash owed.

The developers described the quandary as a "chicken or egg" situation.

When contacted Wednesday, Carr declined a follow-up interview to expand on brief comments made to the council on Tuesday.

Boulder and the two now suing the city have sparred before over the Depot Square apartments: In 2015, Boulder declared the property management had improperly leased some of the affordable units to students who were ineligible to live there.

Pedersen said the city had changed the rules and that he believed all leasing was done in "good faith," but Boulder officials alleged a violation of long-standing policy.

Parking spots

The developers and the city have an agreement in which the 382-space Depot Square parking garage dedicates 100 to Boulder, which then claims revenue from those who park in those spaces.

The city's Access District says the parking garage's management system is not working as per the agreement.

"We dispute that the parking garage is working," Carr said. "We believe that it's not charging (people to park); it's trapping people in."

Pedersen and Shanahan maintain that technical issues with their entry and exit gates have occurred at about a 3 percent level, which they say is not high enough to warrant a complaint.

The garage has also been generating more than the $5,000 per month that the city seeks in revenue, the developers said.

In total, the parking agreement requires that the Access District pay 3001 Pearl $2.6 million, but the agreement also stipulates that for every day the garage is not "operational," the total purchase price owed by the city reduces by $2,000.

Molly Winter, Boulder's executive director of community vitality — a department that manages parking, among other things — is at the center of the developers' complaint.

"She's holding a $2,000-a-day penalty over our heads," Shanahan said. He added that he believes Winter "isn't being monitored by (City Council) and is just pushing her own agenda, not following the legal documents.

"The city long ago went from a business relationship and doing it through the legal documents and are starting to get personal and just have a vendetta."

Offered Pedersen, Carr "is just regurgitating what he hears from Molly. Molly says the system doesn't work and he defends her."

Winter, through a spokeswoman, declined to comment because of pending litigation.

"I think it's been a long process and everybody's tired of working with each other," Shanahan said.

The city is now seeking applicants to fill the commission seats vacated by this week's ousting.

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